Natural gas tumbles most in 15 weeks on warmer December forecast

Natural gas tumbled the most in 15 weeks as revised forecasts showing an unusually warm start to December signaled reduced demand for heating fuels.

Futures dropped as much as 4.6 percent after companies including Commodity Weather Group LLC predicted above-normal temperatures for the lower 48 states over the next six to 10 days. Gas rose to a 13-month high last week after forecasts showed colder weather in early December and a government report showed a bigger-than-expected inventory decline.

“A little bit of cold that we had is coming to a quick end,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “If the weather does turn out to be warmer than normal, we could see” more gas additions to stockpiles.

Natural gas for December delivery fell 15.7 cents, or 4 percent, to $3.744 per million British thermal units at 11:25 a.m. on the New York Mercantile Exchange after dropping 18.1 cents to $3.72 in the biggest intraday percentage decline since Aug. 10. Gas is up 5.7 percent from a year ago.

The futures climbed to $3.933 during the previous trading session, the highest intraday price since Nov. 1, 2011. Electronic trading volume was 147,008 contracts today at 11:28 a.m. compared with about 110,000 at the same time on Nov. 23.

“The perception is that the market was a bit overbought last week” amid low volume because of the U.S. Thanksgiving holiday, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “It looks like the drive to $4 has definitely stalled for the time being.”

Milder Weather

December may start much warmer than usual across the U.S., with highs possibly reaching into the 60s Fahrenheit (15 to 20 Celsius) in the Midwest and along the East Coast, said Matt Rogers, president of Commodity Weather Group in Bethesda, Maryland.

Average temperatures from Dec. 1 to Dec. 5 may be 5 degrees above normal in the East and as much as 15 degrees higher across the Midwest, including Chicago, Rogers said.

“After cool conditions linger in the Midwest and East this week, a strong warm-up is still slated to expand across the nation,” Rogers said. The warm weather won’t dominate December as a whole, Rogers said in a note to clients today.

By Dec. 6, temperatures across the northern Great Plains and the South are expected to return to seasonal levels while remaining about 5 degrees above normal in the U.S. Northeast, Rogers said.